Less than two weeks after Federal Judge Richard Leon ruled that the NSA's "indiscriminate and arbitrary" invasion of privacy is "likely" unconstitutional, giving a trace of hope that America may rise above its Orwellian Banana republic status, here comes New York City District Judge William Pauley to slam the coffin shut on US privacy and the Fourth amendment, and make a mockery of Edward Snowden's alternative Christmas message. Moments ago the WSJ reported that "a federal judge in New York City has ruled that a massive U.S. phone-tracking program is legal." Bananas for everyone!
"There's no near-term resolution in sight," warns TCW Group's David Loevinger, as "Thailand has entered an extended period of political instability." This uncertainty has led to foreigners abandoning the nation's stock market in record size - and collapsing the Thai Baht at the same time. Why should US investors be worried? Thailand was the catalyst that started the 1997 Asian crisis, broke LTCM, and instigated the most epic experiments in central bank liquidity provision on record. With the Fed Tapering, both Indonesia and Thailand (and Turkey) are already seeing major currency collapses but of course, as long as US equities rise, no one cares (which is exactly what they said last time)...
As we noted earlier, political instability is spilling into social unrest:
*TURKISH POLICE SEEK TO BREAK UP PROTEST IN ISTANBUL: NTV TV
*TURKISH POLICE USE TEAR GAS, WATER CANNONS TO END PROTEST
The crowd was chanting "Thief Tayyip Erdogan" in reference to Turkey's graft-probe-implicated PM. And the nation's European cousins are "growing concerned" at events in Turkey, calling for "transparent, impartial justice."
TWTR collapsed ~15% off its highs (losing 1 BBRY or 2 JCPs) and FB tumbled 4%. Stocks overall broke their winning streak with a modestly red close but it was the action in the bond, commodity, and FX markets that stood out. Following copper's flash smash Tuesday, gold and even more so silver held their gains from the surge yesterday and pressed higher still today (silver's best week in 4 months). WTI crude closed at 2-month highs above $100. A massive range day in the USD driven by a EUR surge to test 1.39 (2-year high and fail) swung the world's reserve currency down 1% and back up 1% (in a mini-Bitcoin-like panic). Yield rose modestly on the day with 10Y crossing 3% early on, pulling back, then hovering there into the close for the highest close in 2.5 years. VIX was a one-way stret higher all day. All in all - a glance at these charts will make you wonder WTF...
In September 1939, six days after the United Kingdom declared war on Germany, Charlie Chaplin began filming one of his most epic films ever... and the first “talkie” for the silent film star. It was a courageous project - the ‘Great Dictator’ directly poked fun at Adolf Hitler. At the end of the movie, Chaplin looked into the camera and gave a stirring speech about timeless principles– peace, mutual respect, freedom from evil men who aspire to lead nations. This did not win Chaplin any friends in Washington who were keen to maintain official neutrality. And he paid dearly for it; the Great Dictator was the beginning of an entire decade of turbulent trouble between Chaplin and the US government. His rousing speech at the end of the Great Dictator calls for a world free of violence, intimidation, and government control. Unfortunately, we don’t get to live in that world. This our reality. The world is beautiful. Life is beautiful. But the leaders of humankind surely make it all damned hard to appreciate sometimes.
As we slide into the last weekend of 2013, we read several articles this week that got us thinking about where the markets and economy are likely headed in 2014. There are many high hopes going into 2014. Mid-term election years have a 67% chance of sporting positive returns, interest rates remain subdued along with inflationary pressures and the Federal Reserve is still pumping in $75 billion a month. Markets rising are not what we as investors should be thinking about. Rising stock markets are easy. What we should be pondering are the rising risks that could potentially take it all away when we least expect it. Complacency has never been a hallmark of investor success.
Enter the Fed's recently announced Fixed-Rate Reverse Repo facility, which earlier today saw its greatest use to date in history, when a record $95 billion in Treasury paper was repoed out to the street for a 3 day term, at an 0.03% annual rate. Since there were 68 bidders in the operation, the average participant had an extra $1.4 billion in cash lying around to give to the Fed in exchange for holding Treasurys into year end.
It is time to crank up the Looney Tunes theme song because Wall Street has officially entered crazytown territory. Stocks just keep going higher and higher, and at this point what is happening in the stock market does not bear any resemblance to what is going on in the overall economy whatsoever. So how long can this irrational state of affairs possibly continue? Stocks seem to go up no matter what happens. If there is good news, stocks go up. If there is bad news, stocks go up. If there is no news, stocks go up. On Thursday, the day after Christmas, the Dow was up another 122 points to another new all-time record high. In fact, the Dow has had an astonishing 50 record high closes this year. This reminds me of the kind of euphoria that we witnessed during the peak of the housing bubble. At the time, housing prices just kept going higher and higher and everyone rushed to buy before they were "priced out of the market". But we all know how that ended, and this stock market bubble is headed for a similar ending.
In order to finance the "culture industries' digital transition," France's Culture Ministry believes Facebook and YouTube should be included in the so-called "Culture Tax" that movie theaters and broadcasters currently pay. The argument is that these sites have become "professional" content providers of video-on-demand serives. But, not content in taxing our leisure time, Bloomberg Businessweek reports the French are considering taxing individual use of smartphones, tablets, and other electronic devices capable of accessing movies, music, or other media content. A "painless" 1% sales tax imposed on these items is expected to raise EUR 86 million annnually.
Can't go to bed without first spending 10 minutes on and then sleeping next to your smart, or cell, phone? You are not alone. According to a recent Pew study, America has never been more wired, or rather, unwired to some form of constant form of telecommunications. Among the findings: 91% of all American adults have a cell phone, with this number rising if one is male (93%), black non-Hispanic (93%), is between 18-29 (97%), college graduated (95%), lives in a city (92%), and makes over $75,000 (98%). But that's just the tip of the iceberg. As the chart below shows, Americans have never owned more, or had a broader selection of gadgets to chose from, than they do now.
Wondering why TWTR is down today? Wonder no more... The Wall Street Journal has seen fit to publish the full unadulterated story of how Reuben Kressel, 66, of Rego Park bought (and then stunningly sold) 500 shares of Twitter in just a few weeks for a 76% profit. "I sold out completely," Kressel warns, adding that he "didn't want to take any more chances." Of course, the brokers love it... "in stocks like Twitter, the retail investor is finally starting to come back," Wedbush's director of equity trading gloats, "for the first time in a long time, retail investors are really starting to act differently." Forgive our modest sarcasm and incredulity but when this is an important business news story, believing that we are in anything but a bubble is akin to admitting to be the greater fool.
In the course of conducting public opinion surveys and demographic analyses, the Pew Research Center found a wide range of data milestones, breakthroughs, peaks and valleys in 2013, including record support for same-sex marriage and the legalization of marijuana; record levels of distrust of the federal government; record numbers of mothers who were the primary breadwinners for their families; and record numbers of Millennials living with their parents. Here is a look at the highs and lows Americans reached this year, according to Pew's data.
While Wall Street's hordes of lawyers are doing their best to find the various loopholes in the Volcker Rule that will allow them to resume unconditional prop trading, they are being kept busy with all the various other forms of regulation that have been thrown at them by regulators and the government in an attempt to make it appear that it is not Wall Street but DC that calls the shots. Some, however, such as Morgan Stanley have decided instead of engaging in costly fight with domestic regulation, to engage in cross border regulatory arbitrage, and focus on other, more prop-trading jurisdiction. Like India. As the Economic Times reports, the Indian brokerage arm of global investment banker Morgan Stanley has sought RBI's approval to start proprietary trading under which it will be able to buy and sell securities on its own account in India.